Buy insurance or pay penalty? Some in state weighing costs

That’s the dilemma some uninsured Americans face as the March 31 deadline to enroll in a health-insurance plan creeps closer.

There are some exemptions, and reports surfaced Tuesday that the federal government is loosening conditions surrounding the deadline on the federally run insurance exchange, which operates in 36 states.

But most people in Washington state, which has its own state-run online exchange, still must have insurance by that date if they aren’t stymied by website problems. Otherwise, they risk a fine of $95 or 1 percent of their household income, whichever is larger. Participating in a program such as Medicare or Medicaid qualifies as being covered.

Renton-based insurance broker Mark Hermiller said one of his clients recently wrestled with the penalty-or-purchase question. The woman and her husband, who are in their 50s, own a roofing company and are uninsured.

“The 1 percent is the penalty for your gambling,” Hermiller told her. If you pay the fine and don’t get sick or hurt, he added, you’re OK. But, “If you have an event, you’re hosed.”

“It’s your call,” Hermiller told the customer, “whether you think the odds are going to be with you or against you.”

The woman took the safe bet and bought insurance.

About 4 in 10 uninsured Americans said they planned to get insurance, according to a Kaiser Family Foundation survey released Wednesday.

Despite the Affordable Care Act’s insurance mandate, half of the uninsured people responding said they would forgo coverage.

Two-thirds of the uninsured people surveyed knew about the fine for failing to enroll, but most didn’t realize that they have only until the end of the month to sign up. The survey of 1,504 residents was conducted mid-March, and only 150 of those questioned were uninsured.

In Washington, residents must finalize their insurance applications and make the first premium payment by 11:59 p.m. March 31 to count as being enrolled. If they are buying insurance through the state’s exchange and started their application before the deadline but were unable to finish it because of problems with the website, they may qualify for an extension, said Washington exchange spokeswoman Bethany Frey.

“It will be on a case-by-case basis,” she said. “We’re not extending the deadline by any means.”

Frey said the exchange would verify that the applicant had made “a good-faith effort” to apply and received an online-error message derailing the process.

On Tuesday, the Obama administration said the people in the 36 states using the federally managed exchange will likewise be able to request extensions if they’re unable to finish their applications in time. However, these requests will be made on an honor system; the government will not check to confirm that the delays are related to website errors, The Washington Post reported.

People will likely have until about mid-April to request the extension, and it is unclear how long they would have past the extension to become enrolled.

Frey said Washington officials have not established a date by which people must notify the state that their application is stalled and that they need more time.

People who miss the deadline face a fine calculated one of two ways: either $95 per adult and $47.50 per child (up to $285), or as 1 percent of adjusted household income. Experts say most people will wind up paying the income-based penalty, and the amounts increase dramatically in subsequent years. .

“When they realize it’s $95 or 1 percent, that makes people pause and think I’m paying this money anyway, why not get something for it,” said Megan Grover Howell, Group Health Cooperative’s director of policy and regulatory affairs.

But for some people, even the income penalty isn’t much of a stick, particularly when compared with the cost of their monthly insurance premium. A family of four earning $70,000 a year faces a $500 penalty, according to an online calculator from the Tax Policy Center. In contrast, insurance coverage for that family could cost $500 a month or more for a middle-of-the-road insurance plan.

In Washington, more than 125,000 people have purchased insurance through the Washington Healthplanfinder, the state’s insurance exchange.

The vast majority qualified for a tax break that reduced the cost of their premiums, and more than half were also eligible for benefits that cut their out-of-pocket costs, such as copays and deductibles.

By early February, an additional 184,000 residents had bought plans outside of the exchange, either from brokers or directly from insurance companies.

State officials, however, do not know how many of the people buying insurance were part of the 1 million formerly uninsured residents, or if they already had coverage.

The 2014 penalties, officially called “individual shared responsibility payments,” aren’t due until people pay their taxes to the Internal Revenue Service in April 2015.

And people won’t get a bill for their payment. Instead, the IRS will deduct the amount from future tax refunds. According to HealthCare.gov, the federal insurance-exchange site, “There are no liens, levies or criminal penalties for failing to pay the fee.”

Lisa Stiffler, a freelance writer in Seattle, can be reached at lstiffler.work@gmail.com.This story was produced through a partnership with Kaiser Health News, an editorially independent part of the Kaiser Family Foundation.